The building's name is Beit Yonatan, Hebrew for Jonathan House. It is named after Jonathan Pollard, who has served 23 years in an American prison for spying for Israel.

The area where Beit Yonatan stands is more commonly known as Silwan

I was given a tour of the building by Daniel Luria, an Israeli who works for a Jewish group called Ateret Cohanim. He said the marks round the windows were made by petrol bombs.

Ateret Cohanim is an organisation that helps Jews buy houses, flats and land from Palestinians. Usually they pay well over the market rate.

The newly rich Palestinians who sell often have to disappear - usually abroad - because they are considered traitors.

Mr Luria said it was just business.

"An Arab wants to sell, a Jew wants to buy. It's that simple. We help them do it."

The building's residents call their section of Israeli occupied East Jerusalem the Yemenite Village, after a small group of Jews who lived there until 1938.

The district, which is overwhelmingly Palestinian, is more commonly known as Silwan.

The Israelis who live there, including families with young children, are highly motivated religious nationalists.

They believe that they are doing God's will. They want Beit Yonatan to be the beginning of a Jewish community in Silwan.

Mr Luria said that if local Palestinians didn't like that, they should leave.

State backing

The Israeli state has worked long and hard, and spent a great deal of money, to make the walled Old City and the territory it captured in and around Jerusalem in the 1967 war more Jewish.

Daniel Luria insists that Jerusalem is the centre of the Jewish world.

Its project started as soon as the shooting stopped in 1967, and it continues. Ateret Cohanim regards itself as a vital player in a national struggle.

I asked Mr Luria if he was fighting house-by-house to control the place he says is no longer Arab Jerusalem. He said it was inch-by-inch.

The state helps in all sorts of ways.

The vehicles that pull up outside Beit Yonatan are armoured. The government pays for the private security company which shuttles the residents in and protects the building.

In a court petition, government lawyers justified the expense by saying their lives were in danger.

An order was issued more than two years ago for the Jews who live in Beit Yonatan to leave and for the building to be sealed, as it was built illegally. But the police have never carried it out.

Settlers who go to live in the heart of Palestinian communities in Jerusalem are regarded as trouble-makers by many Israelis who believe in making peace. Their presence raises the tension considerably.

Palestinian story

But Mr Luria, sat in an armoured land rover as we were driven through streets he regards as hostile, dismissed the idea, insisting that his views were shared by most Israelis.

Abdullah Abu Nab is adamant he will not move - however much he is offered

"Land for peace doesn't work… The world has to wake up to reality that Jerusalem, it's impossible to divide.

"Jerusalem is the centre of the Jewish world. For a Jew, for generations, the best thing they could do is to sing 'next year in Jerusalem' on Passover. Today they have the opportunity to live close to God's house, near Temple Mount.

"Every Jew wants a piece of the action, wants to be here, close to God in the heart of Jerusalem," Mr Luria said.

Just down the road from Beit Yonatan, behind a dented steel gate, is the home of the Palestinian Abu Nab family.

Three brothers and their wives and children live there, 45 people in all. The family has rented the property since 1948.

Ateret Cohanim, which is eyeing the property, says the building once was a synagogue.

Abdullah Abu Nab, one of the brothers, said that a year ago they were offered $1m (£647,306) to move out. They refused.

"I told him that even if you pay for every single centimetre in gold I won't agree to leave. I'll only leave my home dead - or they'll have to throw me out in the street," Mr Abu Nab said.

"Those who have no religion will sell, but those who have faith won't give up their land - the land of our Palestinian grandfathers. Money isn't tempting, because money comes and money goes."

His family have now been served with an eviction notice. The Palestinian community in that part of Silwan reacted with fury and there were serious clashes with Israeli security forces. The area is still tense.

Even though some Palestinians have taken the money that is on offer from Ateret Cohanim and its wealthy supporters, many others have not. The Palestinians have learnt over the years that if they leave their land, Israel is not likely to allow them back.

Mr Luria says his side is winning. But there is no chance of peace in Jerusalem if Israel ignores Palestinian rights in the holy city that both sides believe is their birthright.

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